Bid-rigging tales from the Calorie Club

Building firms have been rigging public-sector contracts at secret gatherings dubbed the Calorie Club "because everybody gets fat", according to reports yesterday. The gatherings took place across the south-east of England, where rival builders got together to agree how much each would tender to carry out public sector work, according to the trade magazine Contract Journal.

It claimed that such activity forms a key part of the Office of Fair Trading investigation into alleged bid-rigging by construction firms. The OFT claimed two weeks ago that 112 companies had colluded to inflate the cost of schools, hospitals and universities by secretly discussing the prices they would submit to do the work.

One unnamed constructor told the Journal that a core group of builders would meet regularly, perhaps at a hotel or restaurant, with other companies also invited to take part. However, it appears that Calorie Club members were not above taking a bite out of each other in the name of business.

"You had a number of contractors sitting around the table discussing potential jobs and setting prices. But there was always a rogue firm that would go in after the talks with a lower price than the agreed level and win the job," the constructor said.

According to the report, the Calorie Club ceased meeting several years ago.

The OFT declined to comment on the claims. "We have given the companies named in the statement of objections a couple of months to respond, so it would not be appropriate to discuss details at this stage," an OFT spokesman said.

The 112 companies involved include Balfour Beatty and Carillion, both members of the FTSE 250.

Kurt Calder, communications director of the Construction Confederation, insisted that the vast majority of firms in the building industry did not engage in the type of behaviour that apparently took part at the Calorie Club. "It doesn't seem likely and doesn't ring true," Calder said.

More than 40 firms have already admitted some form of price-fixing, with 37 more applying for leniency in return for assisting in the investigation. But the regulator is also accused of overhyping its case, which has not yet been made public.

The Construction Confederation believes that just nine of the companies named in the statement of objections were guilty of serious bid-rigging, in which firms agreed not to win contracts in return for a compensation payment.

The remaining 103 companies named are merely accused of engaging in "cover pricing" - an activity where a firm puts in a deliberately high price to avoid winning a contract, the Confederation believes. Cover pricing allows a business to keep on a local authority's list of contractors, even if it has not got the capacity to take on fresh work and is not illegal, although telling another builder the details of a bid would be.

Calder accused the OFT of deliberately talking up the level of illegal activity it had uncovered to justify its "expensive, extensive, four-year investigation".

Last week, the OFT apologised to Wm Morrison and paid £100,000 plus costs after wrongly accusing the supermarket of fixing the cost of butter and cheese during its inquiry into the dairy industry.